South Africa: Banks earnings growth hits 7-year low according to EY’s analysis

Mar 08, 2017

Analysis shows total earnings of 6 major banks fell to a 7-year low in 2016.

According to an analysis by EY, the total headline earnings of six major South African banks (Barclays Africa, Capitec, FirstRand, Investec, Nedbank and Standard Bank) fell to a seven year low in 2016. EY in the analysis revealed that total headline earnings of these banks grew by 6.6 percent to R80 billion compared with 16.5 percent growth rate to R70 billion in 2015. Andy Bates, Financial Services Africa Leader at EY said "we are seeing an environment where banks are expanding their lending, pricing in risk more appropriately and still lending profitably but at a lower growth rate than before." Based on an annual economic growth estimate of 0.6% in 2016, EY discovered South African banks earnings were 11x higher than estimated GDP growth. Other factors that weighed on South Africa's domestic banks in 2016 were multi-year low growth rates in total advances and assets. Asset growth from the banks' in the rest of Africa operations turned negative for the first time in over 20 years, falling by 10.8% to R265 million.